The damage inflicted on Kosovo and the entire Balkan rqegion by the war
is going to cost the Western alliance big bucks.

According to the European Commission on Economics, the reconstruction
of Kosovo alone will cost approximately $18 billion. The cost to the rest
of the region will be even higher. The European Union's estimate released
in Washington in June was $30 billion, and as steep as $90 billion when
the entire former Yugoslavia is factored in.

Whatever the final figures, rebuilding the factories, railroads and infrastructure,
which took a pounding from NATO air strikes, will be enormous.

The Clinton administration has stated that it expects the Europeans to
bear the lion's share of the cost of Balkan reconstruction. Spokesmen
for the administration have indicated that the United States has done
its fair share by supplying military hardware and humanitarian aid to
the tune of $7
billion to date.

However, Clinton's announcement regarding the anticipated massive U.S.
budget surplus had the Europeans at the G8 summit in Cologne, Germany
in June talking about where that surplus should go. There was every indication
the United States is expected to accept the economic brunt of the war
in the Balkans.

Chomping at the bit to spread U.S. tax dollars around, the U.S. Senate
passed a bill giving $535 million to the Balkans, excluding Serbia.

Costly Quagmires

Most observers agree that the NATO alliance is going to be bogged down
in the Balkans for the foreseeable future. Accordingly, the Royal Institute
of International Affairs in London has calculated that the proposed annual
price tag for the presence of 50,000 KFOR troops will be as much as $25
billion a year.

The United States participation in Bosnia has cost $9.4 billion with
6,700 troops garrisoned in the area (down from 22,000). The Department
of Defense indicates that approximately $3.5 billion per year will be
spent in Kosovo, assuming there is no eventual ground war.

Daunting economic challenges are in store for the Balkans. These include
such mundane problems as: Which currency to use; where to get specialists
with managerial and technical skills; and the wrenching of economic control
from government hands into private.

In sorting it all out, the usual suspects are lining up to spend the
tax monies of various Western nations as they attempt to fix the Balkans
once and for all. The ultimate goal is to hurry the process of integration
into the community of European nations. Recently, the Crown Prince of
Yugoslavia, Prince Alexander, stated that: "Of course such an economic
integration will take years to bear fruit and cost a great deal. But billions
of dollars have already been spent in peacekeeping operations...it is
time to go back to fundamentals no matter how long it takes." In
other words, the West is committed to the Balkans; indefinitely.

Nevertheless, some in the international community see only the business
opportunities, which death and destruction in the Balkans have created.
Sir John Battle of the British Economic Task Force to the Balkans said
recently, "I am confident that the British business community has
the quality and expertise necessary to help these people rebuild their
lives." While this may sound like the silver economic lining to an
otherwise bleak Western interventionist cloud, similar plans did not work
well in recreating Bosnia.

The expected resurgence of the Bosnian economy never materialized. Kevin
Mannion, director of the International Management Group, a UN reconstruction
agency, asserted recently: "There is no economy in Bosnia, because
there is a general feeling here that broken-down state companies are an
asset when in fact they are a liability."

Foreign investment failed to materialize as envisioned in the Dayton
accords. Though military conflict ended, the leaders of the various Balkan
states have refused to give up control of the economies of their respective
states, with unfortunate consequences for the citizens of the Balkans.

Balkan economies have traditionally been fiefdoms built on spoils and
patronage. The politicians in these countries obstruct economic change
that might lead to free markets, and therefore diffuse rabid ethnic nationalism.
Political leaders like Milosovec will not give up control of their economies
because to do so would be to give up power. So far the West has been unable
to spur needed changes in any of the Balkans. In addition, NATO bombing
has driven these fragile economies even further into chaos.

In the next round of rebuilding, this time in Kosovo, the British business
community is likely to take the lead. A recent analysis in the Village
Voice maintains that due to advance planning the European Union, more
specifically the British Department of Trade and Industry, has already
sent a task force to the EU to plead its case.

The Germans have done likewise, while the U.S. merely has plans to send
a Commerce Department Officer to wade in on the bidding process. Immediate
U.S. business prospects for cashing in don't appear very good at the moment.
However, it is expected that the U.S. will have its day when the IMF intervenes.

Historical "Root Causes" of Economic Failure

After World War II, industrial development took place in northern Yugoslavia,
while the southern half of country merely produced raw materials. As the
price of raw materials fell, serious economic inequalities between the
various states grew. This in turn led to discontent and a desire for independence
in the industrial north.

In the view of Balkan expert Professor Chussodovsky of the University
of Ottawa, the International Monetary Fund is partially responsible for
the turmoil in the Balkans. In addition, Criton Zoakos of Polyconomics,
Inc., and Jude Wanniski, former associate editor of the Wall Street Journal,
have stated: "In 1987 the old Yugoslavia, with all its tragic failures,
was still a functioning state. The International Monetary Fund then took
over economic policy, implementing a number of all too familiar shock
therapies; devaluation, a wage freeze, and price decontrol, designed on
the Harvard/MIT economic textbook principles meant to drive the wage rate
down to a level where it would be internationally economically competitive."

But the interference of the IMF caused revenues to the central government
to shrink and that in turn forced the IMF to insist on raising taxes in
Yugoslavia in order to balance the budget.

As the Cold War was ending in the late 80s, the Federal Republic began
to splinter. At the same time, servicing the national debt became hopeless.
As a result, the attempt to comply with IMF demands made a shaky economic
situation even worse.

Between 1979 and 1985 a quarter of the national income was taken up with
debt service. As a result, the economy began to implode and ethnic conflicts
erupted. Thus, the current conflict in the Balkans may be partly explained
by economic factors as much as by ethnic hatreds and rivalries.

Therefore, while not entirely to blame for the strife in the Balkans,
the IMF and WTO did play a part. Critics of both institutions assert that
as in the case of aid to Mexico several years ago, the major recipients
of economic goodies were the big Western financial institutions rather
than the man on the streets of Pristina or Guadalajara.

Since 1996 the IMF magic bullet for curing structural economic problems
has been the development of something called the Heavily Indebted Poor
Country Initiative (HIPC). According to economists from the Heritage Foundation,
this particular magic bullet, as put forth by the Group of Seven in Cologne,
Germany (including the Clinton Administration), will only make the problems
facing Balkan economies worse.

They maintain, "The debt cycle can be stopped only through debt
forgiveness along with reductions and eventual elimination of bilateral
and multilateral development assistance." In other words, these countries
have to be cut off from the international checkbook and credit cards held
by the Western industrialized nations. The HIPC initiative basically increases
the dependence on foreign loans and guarantees that these loans will continue
indefinitely.

The Heritage analysis concludes, "Congress should take steps to
implement the policies that are necessary to solve poor-country debt problems
and encourage the economic policies that attract private-sector credit
and investment and have proven the best means of achieving long-term,
sustainable economic growth."

However, the fly in the economic ointment is that the basic conditions
for economic freedom and viability in the Balkans - and the Soviet Union
as well - don't exist. There is no free market experience, unless you
want to call the underground economy "free market."

Eastern Europe and Russia are coming from a centralized statist model
based on Marxism or rather the Slavic interpretation of Marxism. There
is no contract law or business ethic. The banking systems and economic
structures are nothing more than the fiefdoms of modern day warlords in
three-piece suits.

The IMF throws money at these economies, wherein no one has a clue about
how financial institutions or basic free market structures work, and expects
good results. The West and the United States turn a blind eye and make
foolish assumptions that "good intentions" will solve all ingrained
problems.

However, the Clinton Administration and current Western governments alone
cannot be blamed for the economic debacle in these emerging nations. The
machinations of the IMF have been going on for a long time, through Republican
as well as Democratic administrations.

The large financial houses which back the IMF have always had a major
stake in "lending" money to these emerging nations, and one
way or the other, good times or bad, it means more money for them. There
is a pervasive ignorance about who pays the bill for these loans. Bankers
don't pay for the IMF, the taxpayers do. Neat deal if you can get away
with it; these "investors of other people's money always do.

Additionally, modern Western governments have foolishly assumed that
emerging countries will automatically do correct and prudent economic
things if enough strings are pulled and enough interest is exacted, or
the rules of capitalism are applied. It hasn't worked that way.

The economies of the Balkans, if experience is any guide, are at the
mercy of economic dictums, which don't work for them. But the economic
gurus of the IMF continue to develop costly new plans and put old snake
oil in fancy new bottles.

In the end, the Balkan experience will show that some multinational corporations
and individuals will profit from rebuilding. But don't look for economic
prosperity or stability for the average Yugoslav, or for other countries
in the area any time soon.

The West will be propping up creaky and moribund economies until a way
is found to: 1) Create an ethical business climate. 2) Make sure monies
given to these countries don't get "invested in off shore bank accounts,
or houses and yachts on the Riviera for the Slavic oligarchy. 3) Cut off
funds until such time as a massive effort to restructure is made. 4) Build
an infrastructure in all segments of the economy but particularly in banking
and investment and back it up with a demanding judicial process. 5) Avoid
being blackmailed by incompetent or unyielding governments threatening
retaliation if loans are not forthcoming.

Aside from refereeing the ethnic conflicts, Western involvement with
capital and manpower will be far more costly than policy makers care to
admit. The benefit to the Balkans may be illusive and short lived once
the West leaves the area. The bill for our involvement in the Balkan quarrel
will be paid by the American and Western alliance public. Unfortunately,
it will be throwing good money after bad.

Newsmax writers Diane Alden of Holly Springs, Mississippi, and Steve
Farrell of Henderson, Nevada, are widely published research writers and
former co-workers at Right Magazine, where Steve served as managing editor.
Joint projects include their upcoming book Democrats In Drag: A Second
Look at the Republican Party. Please email any comments to Steve and
Diane at cyours76@hotmail.com